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IMPACT OF INCENTIVE MEASURES ON THE FLOW OF FOREIGN PRIVATE INVESTMENTS

Business Administration & Management Project Topics

CHAPTER ONE

 INTRODUCTION

BACKGROUND OF STUDY

According to Medupim (2002:1), foreign private investment accounted for 70% of the total industrial investment, in Nigeria, at independence.  This also constituted over 90% of investment in such basic industries as chemical production, and vehicle assembly plants and no less than 90% of other manufacturing sub-sectors.  Foreign Private Direct Investment (FPDI) dominated banking, insurance and mining before the indigenization programme (Ukeje, 2003:285).

 

However, the indigenization programme of 1972 and 1977 drastically reduced foreign private investment in Nigeria.  Ever since then, there have been concerted efforts by the Federal Government of Nigeria to industrialize and attract Foreign Direct Investment, over the years.  This is because, according to Okafor (1983:53), direct foreign investment often means much more than capital inflow.  It also constitutes a source of new product ideas, technology, professional expertise, etc.  These efforts take the form of incentive schemes, which come in different forms.  But common in African and the company income tadx relief, import duty relief, and all other tax incentives (ibid).

Howbeit, in order to attract enough foreign private investment, the macro economic environment must be attractive to foreign investors also.  Issues like industrial infrastructure, sizeable internal market, and political stability together with a friendly tax environment, all culminate to influence foreign private investment into any country.

The Nigerian scenario is such that, since after the indigenisation programmes, successive governments have been trying very hard to woo foreign investments into the country.  This was crystallised by the Federal Government repealing the Nigerian Enterprises Promotion Decree (NEPD) of 1977, in the year 1995, and in its place promulgated the Nigerian Investment Promotion Decree (NIPD) No 16 of 1995, and the Foreign Exchange Decree No 17 of the same 1995. All with the intention of liberating the economy, as to open it up to foreign direct investments.

Added to the above were the carving out of Industrial Zones, and Export Promotion Zones.  Various tax incentives have also been put in place, coupled with the relaxation of fund repatriation.  The deregulation of the economy, and the privatisation of the non-performing public corporations, has also been embarked upon.

To what extent then, has all these moves been fruitful? The aim of this research is to investigate how incentive measures are used by government for attracting Foreign Private Investment in Nigeria and the extent of its success.  To accomplish this, this project paper is presented in five chapters – chapter one introduces it, chapter two deals on the review of related literature, while the methodology of the research is presented in chapter three.  Chapter four handles the data presentation, analysis and the testing of hypotheses.  Chapter five summarizes the findings of the research, draws conclusions and makes recommendation.

STATEMENT OF PROBLEM

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